A-4925, OCTOBER 1, 1924, 4 COMP. GEN. 339

A-4925, OCTOBER 1, 1924, 4 COMP. GEN. 339

CONTRACTS' INCREASE IN RATES - BUREAU OF INTERNAL REVENUE UNDER A PROPOSAL AND ACCEPTANCE AGREEMENT FOR THE RENTAL OF ACCOUNTING MACHINES AND EQUIPMENT WHEREIN IT WAS PROVIDED THAT THE AGREEMENT MIGHT BE TERMINATED BY EITHER PARTY UPON GIVING 30 DAYS' WRITTEN NOTICE, THE PRICES SPECIFIED THEREIN FOR RENTAL ARE BINDING ON BOTH PARTIES UNTIL TERMINATED IN THE MANNER PROVIDED, AND THE PAYMENT OF RENTAL AT INCREASED RATES BASED ON CURRENT COMMERCIAL RATES PRIOR TO SUCH TERMINATION IS UNAUTHORIZED.

DECISION BY COMPTROLLER GENERAL MCCARL, OCTOBER 1, 1924:

THERE HAS BEEN PRESENTED FOR DECISION A QUESTION CONCERNING THE PROPER RENTAL THAT SHOULD HAVE BEEN PAID THE POWERS ACCOUNTING MACHINE CORPORATION FOR CERTAIN ACCOUNTING EQUIPMENT INSTALLED IN AND BEING USED BY THE BUREAU OF INTERNAL REVENUE DURING THE PERIOD PRIOR TO AUGUST 8, 1924, THE EFFECTIVE DATE OF A NEW AGREEMENT THEREFOR.

IT APPEARS THAT THE AGREEMENT FOR RENTAL OF THE EQUIPMENT IN QUESTION IN FORCE PRIOR TO JANUARY 20, 1920, WAS TERMINATED BY SAID CORPORATION BY GIVING 30 DAYS' WRITTEN NOTICE DATED DECEMBER 11, 1919, IN ACCORDANCE WITH THE TERMS OF THE PREEXISTING AGREEMENT. UPON TERMINATION OF THAT AGREEMENT, A PROPOSAL WAS SUBMITTED BY THE CORPORATION OFFERING TO FURNISH EQUIPMENT AT RATES DIFFERENT FROM THOSE THERETOFORE EXISTING. THE PROPOSAL WAS ACCEPTED BY THE COMMISSIONER OF INTERNAL REVENUE FEBRUARY 16, 1920, EFFECTIVE AS OF JANUARY 20, 1920. IT WAS AGREED THEREIN THAT THE EQUIPMENT, ETC., WOULD BE FURNISHED THE BUREAU FOR THE PURPOSE OF TABULATING AND COMPILING STATISTICS AT PRICES AS FOLLOWS:

AUTOMATIC KEY PUNCHING MACHINES AT A RENTAL OF $10 PER MONTH; AUTOMATIC SORTING MACHINES AT A RENTAL OF $20 PER MONTH; COUNTING SORTING MACHINES AT A RENTAL OF $35 PER MONTH; PRINTING TABULATORS AT A RENTAL OF $30 A MONTH FOR EACH MACHINE BASE, $3.60 A MONTH FOR EACH UNIT AND ADDITIONAL UNIT, AND 60 CENTS A MONTH ADDITIONAL FOR EACH ADDITIONAL PRINTING SECTION CONNECTED.

CARDS AND SUPPLIES WERE TO BE FURNISHED AT THE FOLLOWING RATES PROVIDED ORDERS WERE PLACED FOR NOT LESS THAN 10,000 CARDS OF A GIVEN FORM OR COLOR:

MANILA CARDS, 7 3/8 BY 3 1/4 INCHES, AT $1.25 PER THOUSAND; COLORED CARDS OF THE SAME DIMENSIONS AT $1.35 PER THOUSAND; SMALL CARD BOXES AT 20 CENTS EACH; LARGE CARD BOXES AT $1.25 EACH.

THE EQUIPMENT AND CARDS WERE TO BE SUPPLIED AND ACCEPTED ON THE FOLLOWING TERMS AND CONDITIONS:

1. THAT ALL SHIPMENTS AT THE ABOVE PRICES ARE F.O.B. YOUR FACTORY IN BROOKLYN, N.Y. GOVERNMENT BILLS OF LADING TO BE SUPPLIED BY THE TREASURY DEPARTMENT TO COVER THE SHIPMENTS TO WASHINGTON, AND UPON THE DISCONTINUANCE OF ANY OR ALL OF THE ABOVE EQUIPMENT SIMILAR BILLS OF LADING TO BE SUPPLIED TO COVER ITS RETURN TO THE FACTORY OF THE COMPANY.

2. THAT THE MONTHLY RENTALS, AS ABOVE STATED, SHALL BEGIN UPON THE INSTALLING IN PROPER WORKING ORDER OF EACH MACHINE RENTED.

3. THAT PAYMENT FOR THE CARDS, BOXES, AND SORTING RACKS ABOVE LISTED SHALL BE MADE UPON THE DELIVERY IN PROPER CONDITION OF THE SAME.

4. THAT YOUR COMPANY AGREES TO MAINTAIN IN GOOD WORKING ORDER ALL EQUIPMENT FURNISHED UNDER THIS PROPOSAL AT ITS OWN EXPENSE, EXCEPTING REPAIRS MADE NECESSARY BY DAMAGES TO THE EQUIPMENT DUE TO THE NEGLIGENCE OF THE EMPLOYEES OF THE TREASURY DEPARTMENT.

5. RENTAL SHALL BE PAYABLE AT THE END OF EACH CALENDAR MONTH.

6. THAT ALL CARDS HANDLED ON THE ABOVE EQUIPMENT SHALL BE PURCHASED FROM POWERS ACCOUNTING MACHINE COMPANY.

7. THAT THE TREASURY DEPARTMENT SHALL PAY THE COST OF COMPOSITION OF TYPE MATTER ON CARD FORMS ORDERED, AS WELL AS THE COST OF ANY CHANGES THEREIN.

8. THAT THE TERMS AND CONDITIONS HEREOF SHALL APPLY TO SUCH ADDITIONAL EQUIPMENT AS MAY HEREAFTER BE INSTALLED.

9. THAT THIS AGREEMENT MAY BE TERMINATED BY EITHER PARTY TO THE AGREEMENT UPON GIVING THIRTY DAYS' NOTICE IN WRITING OF ITS DESIRE SO TO DO.

THERE IS NOTHING OF RECORD TO INDICATE THAT THE AGREEMENT AS PER ACCEPTANCE OF FEBRUARY 16, 1920, WAS EVER TERMINATED AS PROVIDED FOR IN PARAGRAPH 9 THEREOF, OR WAS SUPERSEDED BY ANOTHER AGREEMENT UNTIL THE ACCEPTANCE ON AUGUST 8, 1924, BY THE COMMISSIONER OF INTERNAL REVENUE, OF A PROPOSAL SUBMITTED UNDER DATE OF JUNE 16, 1924, IN WHICH THE RATES OF RENTAL FOR THE EQUIPMENT WERE INCREASED. REGARDLESS OF THIS FACT AND ON THE AUTHORITY, APPARENTLY, OF A LETTER FROM THE THEN COMMISSIONER OF INTERNAL REVENUE, DATED JANUARY 10, 1921, AND WITHOUT ANY CONSIDERATION TO THE UNITED STATES FOR THE CHANGED RATES BEING APPARENT, PAYMENTS OF INCREASED RENTAL FOR THE EQUIPMENT, COMMENCING JANUARY 10, 1921, WERE MADE TO SAID CORPORATION BY THE DISBURSING CLERK OF THE TREASURY DEPARTMENT AT THE RATE OF $15 PER MONTH FOR AUTOMATIC PUNCHING MACHINES, $30 PER MONTH FOR AUTOMATIC SORTING MACHINES, $50 PER MONTH FOR COUNTING SORTING MACHINES, AND $95 PER MONTH FOR TABULATORS WITH SIX PRINTING UNITS. THESE RATES OF RENTAL HAVE BEEN PAID FROM MONTH TO MONTH SINCE THAT DATE AND HAVE NOW BEEN MADE THE BASIS OF RENTAL IN THE NEW AGREEMENT ABOVE REFERRED TO.

BY WAY OF EXPLANATION OF THE INCREASED RENTAL BEING PAID FOR THE EQUIPMENT, THE HEAD, DIVISION OF SUPPLIES AND EQUIPMENT, OFFICE OF THE COMMISSIONER OF INTERNAL REVENUE, ADVISED ON MAY 12, 1924, THAT THE EQUIPMENT WAS INSTALLED BY THE COMPANY SEVERAL YEARS AGO FOR USE IN CONNECTION WITH THE COMPILATION OF STATISTICS ON NARCOTIC AND TOBACCO WORK, AT PRICES PREVAILING COMMERCIALLY. NO FORMAL CONTRACT WAS IN EFFECT DURING THE FISCAL YEAR 1923, ALTHOUGH, IF REQUIRED BY THE GENERAL ACCOUNTING OFFICE, A STATEMENT OF CURRENT PRICES AT THAT TIME CAN BE SECURED FROM THE COMPANY, * * *

AND AGAIN ON JUNE 14, 1924, THAT---

* * * THE FACT THAT THE PRICES OF THE JUNE, 1923, VOUCHER DIFFER FROM THE PRICES GIVEN IN THE PROPOSAL IS DUE TO THE FLUCTUATION IN THE STANDARD RATES CHARGED BY THE COMPANY. THE INSTALLATION OF THE TABULATING MACHINE EQUIPMENT WAS IN ACCORDANCE WITH AN ORAL AGREEMENT WITH THE COMPANY AND THE PRICES CHARGED ARE THE STANDARD COMMERCIAL RATES OF THE COMPANY.

THE TREASURY DEPARTMENT IS NOT REQUIRED BY LAW TO ENTER INTO SO CALLED FORMAL CONTRACTS FOR SUPPLIES OF THIS NATURE, BUT WHEN PROPOSALS THEREFOR ARE MADE AND ACCEPTED, SUCH PROPOSAL AND ACCEPTANCE BECOME THE CONTRACT UNDER WHICH THE SUPPLIES ARE TO BE FURNISHED AND THE TERMS AND CONDITIONS THEREOF ARE JUST AS BINDING ON THE PARTIES THERETO AS THOUGH THE AGREEMENT HAD BEEN CONSUMMATED IN A MORE FORMAL MANNER. THE PROPOSAL AND ACCEPTANCE AGREEMENT EFFECTIVE JANUARY 20, 1920, CONSTITUTED SUCH AN AGREEMENT IN THIS CASE AND THE PRICES SPECIFIED FOR RENTAL OF THE EQUIPMENT COULD NOT BE INCREASED OR DECREASED EXCEPT BY TERMINATION OF THAT AGREEMENT AS PROVIDED FOR IN PARAGRAPH 9 OF ITS TERMS AND CONDITIONS. THE AGREEMENT WAS NOT TO RUN FOR ANY SPECIFIED TIME, BUT ITS PROVISIONS WERE TO BE EFFECTIVE UNTIL EITHER PARTY GAVE 30 DAYS' NOTICE IN WRITING OF ITS DESIRE TO TERMINATE SAME. THE PAYMENT OF RENTAL FOR THE EQUIPMENT AT AN INCREASED RATES WAS NOT PROPERLY AUTHORIZED TO BE MADE, NOR COULD SUCH INCREASED RATES BE LEGALLY AUTHORIZED EXCEPT BY TERMINATION OF THE AGREEMENT IN THE MANNER PROVIDED FOR AND THE ENTRY INTO A LIKE AGREEMENT THAT WOULD BE EQUALLY BINDING ON BOTH PARTIES THERETO.

FROM THE EVIDENCE NOW ON FILE THERE DOES NOT APPEAR TO HAVE BEEN ANY LEGAL AUTHORITY FOR THE PAYMENT OF INCREASED RENTAL TO THE POWERS ACCOUNTING MACHINE CORPORATION, AND, ACCORDINGLY, THE ACCOUNTS OF THE DISBURSING CLERK OF THE TREASURY DEPARTMENT WILL BE REOPENED AND THE AMOUNT OF THE EXCESSIVE RENTAL PAID FOR THE PERIOD FROM JANUARY 10, 1921, TO THE EFFECTIVE DATE OF THE NEW AGREEMENT WILL BE CHARGED AGAINST THAT OFFICER ON ACCOUNT OF SUCH UNAUTHORIZED AND ILLEGAL PAYMENTS TO SAID CORPORATION.

WITH REFERENCE TO ANY PAYMENTS MADE AT THE INCREASED RATES PRESCRIBED IN THE ACCEPTANCE OF AUGUST 8, 1924, NONE OF WHICH IS NOW BEFORE THIS OFFICE, IT DOES NOT APPEAR THAT THE AGREEMENT EFFECTIVE JANUARY 20, 1920, HAS EVER BEEN TERMINATED BY A 30 DAYS' WRITTEN NOTICE, AS PROVIDED THEREIN, THE ABSENCE OF WHICH RAISES THE PRESUMPTION THAT THE AGREEMENT OF JANUARY 20, 1920, IS STILL IN FULL FORCE AND EFFECT. THERE IS NO OBLIGATION UPON THE GOVERNMENT TO VOLUNTARILY INCREASE THE RATES, THERE BEING NO CONSIDERATION THEREFOR SO LONG AS THE SERVICE MAY BE REQUIRED AT A LOWER RATE.